This is This week saw the Fair Work Commission (FWC) bring down an adjustment to Penalty Rates in Australia for some Retail and Hospitality Workers. If you read the newspapers, listen to the radio, and watch TV coverage it comes across as the greatest betrayal of the working man (or woman) since the Great Depression.
In this article, I’ll give my view on this. Disclaimer: I own a couple of Small Business’s which (potentially) benefit from this decision. I have looked after the HR department of a larger ASX listed company in the past and have some reasonable HR experience. I also really think retail shops should be closed on a Sunday so people can do other (more sociable, community and family friendly) activities rather than trudging around shops pretending their lives are enriched by doing so. I think unions are a critical part of the free enterprise system but have probably lost their way. Given I have probably annoyed more than 50% of the population lets continue.
Apart from the specific issue in question, I’d really like people to consider the process here, and how accurately the subject is being discussed by people involved and the media.
History / Ruling of the Fair Work Commission
The Fair Work Commission was established in 2009 by the then Rudd Labor Government. The purpose of the FWC is to independently assess the wage rates and conditions of the people in the Modern Award System, oversee enterprise bargaining, arbitrate on industrial action and handle dispute resolution. In 2013 the then Minister for Workplace Relations Bill Shorten specifically passed legislation which required the FWC to review penalty rates as part of its four years review process.
It should be noted that the FWC Commissioners spent thousands of hours receiving submissions from interested parties and reviewing these before coming up with their determinations. I have no questions regarding the qualifications of the Commissioners or their independence. It should be noted though that the majority of these were appointed during and by the previous Labor Government and come from a Trade Union background.
The FWC ruled that there would be no changes to Saturday Penalty Rates. In relation to Sunday rates, the commission cut:
Hospitality award rates for full-time and part-time workers from 175% to 150%
Fast food award rates for level one employee from 150% to 125% for full-time and part-time employees and from 175% to 150% for casuals
Retail award rates for full-time and part-time employees from 200% to 150% and for casuals from 200% to 175%
Pharmacy award rates from 200% to 150% for full-time and part-time workers for work between 7 am and 9 pm, and from 200% to 175% for casuals at the same times.
Sunday rates remained at 175% for casuals in the hospitality industry, and there was no cut for level two and three employees in the fast food award. The commission cut public holiday rates in the hospitality and retail awards – except for clubs – from 250% to 225% for full-time and part-time employees. The casuals’ rate will be 250%.
Interestingly the FWC is not making changes to the penalty rates for the award that governs restaurants.
The Summary of the FWC ruling can be found here:
https://www.fwc.gov.au/documents/sites/awardsmodernfouryr/2017fwcfb1001-summary.pdf
Big Business Response
Unsurprisingly the employer groups have come out and stated that this would lead to an increase in employment. Being generous (cynical) I would suggest that it will lead to more employment for lobbyists. Given the reductions in penalty rates simply apply for Sundays, and are really minor in nature, I doubt that it will lead to Small Business employing many additional staff members. At best, I would envisage that some people’s hours will be extended (for which they will be better off in gross terms).
Union Response
What I find amusing, although more disturbing for their lack of honesty and competence is the response from the of the usual “Protector of Workers”; in this case the Union for the Retail and fast Food Sector – the SDA, and of course the Australian Labor Party.
Both of these have come out with their own horror stories and if we are to believe the streets will soon be filled with homeless people (because they can’t make ends meet). I’ll deal with the maths later but based on the SDA rhetoric you would think that Sundays penalty rates are sacrosanct; non-negotiable; a fundamental human right. Except you’d be wrong.
More humorously is the ALP’s response to this. Bill Shorten introduced Trent Hunter as one of the “people who are directly affected by the hip pocket by this appalling decision”. Trent should be up to speed with how the FWC impacted him too. Apart from being a member of the ALP, he is also a delegate of the SDA union. In from of the camera, he told journalists “I rely on Sunday penalty rates. I am rostered on every single Sunday. I will now lose $109 per week.
Except none of that is true.
Trent is covered by an Enterprise Agreement between the SDA and Coles. His pay won’t change at all. Notwithstanding this, he gets 150% of his normal wage on Sunday currently (which is the same as the FWC proposes for all workers. So even if his current Enterprise Agreement lapses, he will be no worse off. In fact, if he were switched to an award rate he would probably be better off.
The SDA is completely hypocritical with its stand on Sunday penalties. The SDA has negotiated Enterprise Agreements between most of the workers they represent and the big end of town already. You won’t find any large employer paying 200% on a Sunday; they’ve already negotiated this away. For example of you are working at Coles or Woolworth’s to name a couple the Sunday loading rate has been at 150% for a long time. If you work in the Fast Food Industry at say KFC or McDonalds there is absolutely no loading for Saturdays or Sundays. Apparently, that’s OK but not for those people working at the local Fish & Chips shop.
Actual Impact
There is a claim reported that some workers will be $6000 worse off under this change.
Let’s consider an example of someone with a normal rate of $24 whose penalty rate for Sunday has been cut from 200% to 150% on Sunday (i.e. about the maximum possible cut proposed by the FWC). This would reduce the effective Sunday rate from $48 down to $36 per hour. If we assume that this person works 8 hours this reduces their pay from $384 down to $288; a reduction of $96. This is before tax so assuming we are on the 30% marginal tax rate then the after tax amount becomes $67.
Whilst I can see how $67 per week is significant to a lot of people it is well short of the claimed $6000 per years claimed by the unions. And let’s not forget that this is the largest example of the reduction in penalty rates as most are only reducing from 200% down to 175%.
Big Picture
Perhaps we have really entered the “Post Truth” era. It would appear these days that every fact that is not casting your situation in a positive favour is conveniently ignored.
The reality is in our new modern 24/7 economy, where people want to shop on Sundays, Sunday is no longer that special. As a result, it seems inevitable that penalty rates will decline further although I doubt they will disappear altogether. In any case, the SDA has already made deals with the big end of town (which covers 80% or workers) so the impact if the current ruling simply creates an equal playing field for small business.
The problem here is that there will be people who will be earning less. Most of us condition ourselves to live on 100% of what we earn. At a previous firm I worked at we acquired lots employees through companies we bought. We never reduced their gross pay even if it was above market. The reason was simply: When you try to reduce what people earn (whether they deserve it or not) you will make people angry.
The media also just seems to be repeating lines spun by interest groups (in this case employers, unions, political parties) without asking any of the hard questions; actually without asking any questions. Moreover, only article which I could find which as somewhat though provoking as found in “The Australian” (in an opinion piece) which few people would have access to. Donald Trump is concerned about the media covering fake news. I’m concerned that they are not really covering news at all.
You have to wonder about the competence of Bill Shorten as well. I’m not sure the other side of politics is any better, but for someone who wants to be Prime Minister, you would expect him to do a little research before trotting out someone like Mr Hunter. Supremely hypocritical he is now criticising the same body he helps set up and shape so he can score a few cheap political points. Bill Shorten is after all one of the few people in parliament who has actually reduced the penalty rates for workers when he was the leader of the Australian Workers Union.
I would again question how many additional jobs will be created by this. Very few I would suggest.
And lastly, I am dismayed at what the unions are doing. If you read say the Coles Enterprise Bargaining Agreement (where for reference the penalty rate for Sunday has been 150% for a long time) you will notice that Coles is required to “encourage” employees to join the union, and cast the union in a positive light. It would appear that the union movement have moved away from representing the workers to serving their own self-interest.
The sky isn’t going to fall. This ruling really is adjusting the penalty rates for people working for the small business to the same that the large end of town currently pays.
